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Can a trader buy options by using uncovered options signals?

Our signals are designed for uncovered options trading. When we issue a signal we assume that options are sold short to open a trade and options are bought to close a trade. When we issue a signal to sell short puts we expect the market to move up and when we issue a signal to sell short calls we expect the market to move down.

Of course this information could be used differently from our explicit signal, however, a trader who wishes to use our signal has to realize that this might involve additional risk, and the trader's return will differ from the return generated by our system, plus a trader would not be able to autotrade our signals. In addition, since our signals are issued in real-time this may require a trader to monitor our service within the trading hours.

For instance if a trader decided to use our uncovered options signals to buy options it is recommended that the trader develop a trading strategy of following our signals. The following rules might be an example of such strategy:

• Buy calls when the system issues a signal to sell short puts;
• Buy puts when the system issues a signal to sell short calls
• Buy only nearest in the money options;
• Buy only 3-2 month expiration options;
• Open a trade when the system sends alert that NOS trade is opened.;
• Close a trade when the system sends alert that NOS trade is closed;
• Think about closing a trade if a system stays in the position for more then 3 weeks ( time affects options price and it's critical for the options buyer while it's in the hand of an options seller).

Of course this is only an example of rules which could be modified in accordance to personal trading style and risk tolerance. A trader who prefers to enter a limit order may modify these rules by assuming an approximate suggested entry price and expected profit based on our signal. For instance if our system issued a signal:

• to sell short calls at or above $1.50;
• to close position when such calls are traded at or below $1.20 (about 25% expected profit);
• at the current moment these calls are traded at $1.45.

If a hypothetical trader who wishes to buy options based on this signal finds 3-month expiration nearest "in the money" puts that are traded at the current at $1.20 - he may decide

• to buy these puts when they are traded at or below $1.10;
• to sell these puts when they are traded at or above $1.35 (about 25% expected profit).

Important: A trader has to understand that uncovered options trading is very risky and not suitable to every investor. A trader who wishes to use the uncovered options signals (generated by a system in the way that differs from the way that it is recommended by the system) involves additional risk. An options buyer who decided to use uncovered options signal has to understand that time is options sellers ally and time works against the options buyer.

Uncovered SPY Options Signals Past 2 Months +338% -0% Our Signals Buy & Hold

As of 5/16/2008

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